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Principles of Marketing

14.3 The Use of Metrics to Measure Advertising Campaign Effectiveness

Principles of Marketing14.3 The Use of Metrics to Measure Advertising Campaign Effectiveness
Table of contents
  1. Preface
  2. Setting the Stage
    1. 1 Unit Introduction
    2. 1 Marketing and Customer Value
      1. In the Spotlight
      2. 1.1 Marketing and the Marketing Process
      3. 1.2 The Marketing Mix and the 4Ps of Marketing
      4. 1.3 Factors Comprising and Affecting the Marketing Environment
      5. 1.4 Evolution of the Marketing Concept
      6. 1.5 Determining Consumer Needs and Wants
      7. 1.6 Customer Relationship Management (CRM)
      8. 1.7 Ethical Marketing
      9. Chapter Summary
      10. Key Terms
      11. Applied Marketing Knowledge: Discussion Questions
      12. Critical Thinking Exercises
      13. Building Your Personal Brand
      14. What Do Marketers Do?
      15. Marketing Plan Exercise
      16. Closing Company Case
      17. References
    3. 2 Strategic Planning in Marketing
      1. In the Spotlight
      2. 2.1 Developing a Strategic Plan
      3. 2.2 The Role of Marketing in the Strategic Planning Process
      4. 2.3 Purpose and Structure of the Marketing Plan
      5. 2.4 Marketing Plan Progress Using Metrics
      6. 2.5 Ethical Issues in Developing a Marketing Strategy
      7. Chapter Summary
      8. Key Terms
      9. Applied Marketing Knowledge: Discussion Questions
      10. Critical Thinking Exercises
      11. Building Your Personal Brand
      12. What Do Marketers Do?
      13. Marketing Plan Exercise
      14. Closing Company Case
      15. References
  3. Understanding the Marketplace
    1. 2 Unit Introduction
    2. 3 Consumer Markets and Purchasing Behavior
      1. In the Spotlight
      2. 3.1 Understanding Consumer Markets and Buying Behavior
      3. 3.2 Factors That Influence Consumer Buying Behavior
      4. 3.3 The Consumer Purchasing Decision Process
      5. 3.4 Ethical Issues in Consumer Buying Behavior
      6. Chapter Summary
      7. Key Terms
      8. Applied Marketing Knowledge: Discussion Questions
      9. Critical Thinking Exercises
      10. Building Your Personal Brand
      11. What Do Marketers Do?
      12. Closing Company Case
      13. References
    3. 4 Business Markets and Purchasing Behavior
      1. In the Spotlight
      2. 4.1 The Business-to-Business (B2B) Market
      3. 4.2 Buyers and Buying Situations in a B2B Market
      4. 4.3 Major Influences on B2B Buyer Behavior
      5. 4.4 Stages in the B2B Buying Process
      6. 4.5 Ethical Issues in B2B Marketing
      7. Chapter Summary
      8. Key Terms
      9. Applied Marketing Knowledge: Discussion Questions
      10. Critical Thinking Exercises
      11. Building Your Personal Brand
      12. What Do Marketers Do?
      13. Closing Company Case
      14. References
    4. 5 Market Segmentation, Targeting, and Positioning
      1. In the Spotlight
      2. 5.1 Market Segmentation and Consumer Markets
      3. 5.2 Segmentation of B2B Markets
      4. 5.3 Segmentation of International Markets
      5. 5.4 Essential Factors in Effective Market Segmentation
      6. 5.5 Selecting Target Markets
      7. 5.6 Product Positioning
      8. 5.7 Ethical Concerns and Target Marketing
      9. Chapter Summary
      10. Key Terms
      11. Applied Marketing Knowledge: Discussion Questions
      12. Critical Thinking Exercises
      13. Building Your Personal Brand
      14. What Do Marketers Do?
      15. Marketing Plan Exercise
      16. Closing Company Case
      17. References
    5. 6 Marketing Research and Market Intelligence
      1. In the Spotlight
      2. 6.1 Marketing Research and Big Data
      3. 6.2 Sources of Marketing Information
      4. 6.3 Steps in a Successful Marketing Research Plan
      5. 6.4 Ethical Issues in Marketing Research
      6. Chapter Summary
      7. Key Terms
      8. Applied Marketing Knowledge: Discussion Questions
      9. Critical Thinking Exercises
      10. Building Your Personal Brand
      11. What Do Marketers Do?
      12. Marketing Plan Exercise
      13. Closing Company Case
      14. References
    6. 7 Marketing in a Global Environment
      1. In the Spotlight
      2. 7.1 The Global Market and Advantages of International Trade
      3. 7.2 Assessment of Global Markets for Opportunities
      4. 7.3 Entering the Global Arena
      5. 7.4 Marketing in a Global Environment
      6. 7.5 Ethical Issues in the Global Marketplace
      7. Chapter Summary
      8. Key Terms
      9. Applied Marketing Knowledge: Discussion Questions
      10. Critical Thinking Exercises
      11. Building Your Personal Brand
      12. What Do Marketers Do?
      13. Closing Company Case
      14. References
    7. 8 Marketing in a Diverse Marketplace
      1. In the Spotlight
      2. 8.1 Strategic Marketing: Standardization versus Adaptation
      3. 8.2 Diversity and Inclusion Marketing
      4. 8.3 Multicultural Marketing
      5. 8.4 Marketing to Hispanic, Black, and Asian Consumers
      6. 8.5 Marketing to Sociodemographic Groups
      7. 8.6 Ethical Issues in Diversity Marketing
      8. Chapter Summary
      9. Key Terms
      10. Applied Marketing Knowledge: Discussion Questions
      11. Critical Thinking Exercises
      12. Building Your Personal Brand
      13. What Do Marketers Do?
      14. Closing Company Case
      15. References
  4. Product, Promotion, Price, and Place
    1. 3 Unit Introduction
    2. 9 Products: Consumer Offerings
      1. In the Spotlight
      2. 9.1 Products, Services, and Experiences
      3. 9.2 Product Items, Product Lines, and Product Mixes
      4. 9.3 The Product Life Cycle
      5. 9.4 Marketing Strategies at Each Stage of the Product Life Cycle
      6. 9.5 Branding and Brand Development
      7. 9.6 Forms of Brand Development, Brand Loyalty, and Brand Metrics
      8. 9.7 Creating Value through Packaging and Labeling
      9. 9.8 Environmental Concerns Regarding Packaging
      10. 9.9 Ethical Issues in Packaging
      11. Chapter Summary
      12. Key Terms
      13. Applied Marketing Knowledge: Discussion Questions
      14. Critical Thinking Exercises
      15. Building Your Personal Brand
      16. What Do Marketers Do?
      17. Marketing Plan Exercise
      18. Closing Company Case
      19. References
    3. 10 Maintaining a Competitive Edge with New Offerings
      1. In the Spotlight
      2. 10.1 New Products from a Customer’s Perspective
      3. 10.2 Stages of the New Product Development Process
      4. 10.3 The Use of Metrics in Evaluating New Products
      5. 10.4 Factors Contributing to the Success or Failure of New Products
      6. 10.5 Stages in the Consumer Adoption Process for New Products
      7. 10.6 Ethical Considerations in New Product Development
      8. Chapter Summary
      9. Key Terms
      10. Applied Marketing Knowledge: Discussion Questions
      11. Critical Thinking Exercises
      12. Building Your Personal Brand
      13. What Do Marketers Do?
      14. Closing Company Case
      15. References
    4. 11 Services: The Intangible Product
      1. In the Spotlight
      2. 11.1 Classification of Services
      3. 11.2 The Service-Profit Chain Model and the Service Marketing Triangle
      4. 11.3 The Gap Model of Service Quality
      5. 11.4 Ethical Considerations in Providing Services
      6. Chapter Summary
      7. Key Terms
      8. Applied Marketing Knowledge: Discussion Questions
      9. Critical Thinking Exercises
      10. Building Your Personal Brand
      11. What Do Marketers Do?
      12. Closing Company Case
      13. References
    5. 12 Pricing Products and Services
      1. In the Spotlight
      2. 12.1 Pricing and Its Role in the Marketing Mix
      3. 12.2 The Five Critical Cs of Pricing
      4. 12.3 The Five-Step Procedure for Establishing Pricing Policy
      5. 12.4 Pricing Strategies for New Products
      6. 12.5 Pricing Strategies and Tactics for Existing Products
      7. 12.6 Ethical Considerations in Pricing
      8. Chapter Summary
      9. Key Terms
      10. Applied Marketing Knowledge: Discussion Questions
      11. Critical Thinking Exercises
      12. Building Your Personal Brand
      13. What Do Marketers Do?
      14. Marketing Plan Exercise
      15. Closing Company Case
      16. References
    6. 13 Integrated Marketing Communications
      1. In the Spotlight
      2. 13.1 The Promotion Mix and Its Elements
      3. 13.2 The Communication Process
      4. 13.3 Integrated Marketing Communications
      5. 13.4 Steps in the IMC Planning Process
      6. 13.5 Ethical Issues in Marketing Communication
      7. Chapter Summary
      8. Key Terms
      9. Applied Marketing Knowledge: Discussion Questions
      10. Critical Thinking Exercises
      11. Building Your Personal Brand
      12. What Do Marketers Do?
      13. Marketing Plan Exercise
      14. Closing Company Case
      15. References
    7. 14 The Promotion Mix: Advertising and Public Relations
      1. In the Spotlight
      2. 14.1 Advertising in the Promotion Mix
      3. 14.2 Major Decisions in Developing an Advertising Plan
      4. 14.3 The Use of Metrics to Measure Advertising Campaign Effectiveness
      5. 14.4 Public Relations and Its Role in the Promotion Mix
      6. 14.5 The Advantages and Disadvantages of Public Relations
      7. 14.6 Ethical Concerns in Advertising and Public Relations
      8. Chapter Summary
      9. Key Terms
      10. Applied Marketing Knowledge: Discussion Questions
      11. Critical Thinking Exercises
      12. Building Your Personal Brand
      13. What Do Marketers Do?
      14. Closing Company Case
      15. References
    8. 15 The Promotion Mix: Personal Selling and Sales Promotion
      1. In the Spotlight
      2. 15.1 Personal Selling and Its Role in the Promotion Mix
      3. 15.2 Classifications of Salespeople Involved in Personal Selling
      4. 15.3 Steps in the Personal Selling Process
      5. 15.4 Management of the Sales Force
      6. 15.5 Sales Promotion and Its Role in the Promotion Mix
      7. 15.6 Main Types of Sales Promotion
      8. 15.7 Ethical Issues in Personal Selling and Sales Promotion
      9. Chapter Summary
      10. Key Terms
      11. Applied Marketing Knowledge: Discussion Questions
      12. Critical Thinking Exercises
      13. Building Your Personal Brand
      14. What Do Marketers Do?
      15. Closing Company Case
      16. References
    9. 16 Direct, Online, Social Media, and Mobile Marketing
      1. In the Spotlight
      2. 16.1 Traditional Direct Marketing
      3. 16.2 Social Media and Mobile Marketing
      4. 16.3 Metrics Used to Evaluate the Success of Online Marketing
      5. 16.4 Ethical Issues in Digital Marketing and Social Media
      6. Chapter Summary
      7. Key Terms
      8. Applied Marketing Knowledge: Discussion Questions
      9. Critical Thinking Exercises
      10. Building Your Personal Brand
      11. What Do Marketers Do?
      12. Closing Company Case
      13. References
    10. 17 Distribution: Delivering Customer Value
      1. In the Spotlight
      2. 17.1 The Use and Value of Marketing Channels
      3. 17.2 Types of Marketing Channels
      4. 17.3 Factors Influencing Channel Choice
      5. 17.4 Managing the Distribution Channel
      6. 17.5 The Supply Chain and Its Functions
      7. 17.6 Logistics and Its Functions
      8. 17.7 Ethical Issues in Supply Chain Management
      9. Chapter Summary
      10. Key Terms
      11. Applied Marketing Knowledge: Discussion Questions
      12. Critical Thinking Exercises
      13. Building Your Personal Brand
      14. What Do Marketers Do?
      15. Marketing Plan Exercise
      16. Closing Company Case
      17. References
    11. 18 Retailing and Wholesaling
      1. In the Spotlight
      2. 18.1 Retailing and the Role of Retailers in the Distribution Channel
      3. 18.2 Major Types of Retailers
      4. 18.3 Retailing Strategy Decisions
      5. 18.4 Recent Trends in Retailing
      6. 18.5 Wholesaling
      7. 18.6 Recent Trends in Wholesaling
      8. 18.7 Ethical Issues in Retailing and Wholesaling
      9. Chapter Summary
      10. Key Terms
      11. Applied Marketing Knowledge: Discussion Questions
      12. Critical Thinking Exercises
      13. Building Your Personal Brand
      14. What Do Marketers Do?
      15. Marketing Plan Exercise
      16. Closing Company Case
      17. References
    12. 19 Sustainable Marketing: The New Paradigm
      1. In the Spotlight
      2. 19.1 Sustainable Marketing
      3. 19.2 Traditional Marketing versus Sustainable Marketing
      4. 19.3 The Benefits of Sustainable Marketing
      5. 19.4 Sustainable Marketing Principles
      6. 19.5 Purpose-Driven Marketing
      7. Chapter Summary
      8. Key Terms
      9. Applied Marketing Knowledge: Discussion Questions
      10. Critical Thinking Exercises
      11. Building Your Personal Brand
      12. References
  5. Answer Key
    1. Chapter 1
    2. Chapter 2
    3. Chapter 3
    4. Chapter 4
    5. Chapter 5
    6. Chapter 6
    7. Chapter 7
    8. Chapter 8
    9. Chapter 9
    10. Chapter 10
    11. Chapter 11
    12. Chapter 12
    13. Chapter 13
    14. Chapter 14
    15. Chapter 15
    16. Chapter 16
    17. Chapter 17
    18. Chapter 18
    19. Chapter 19
  6. Index

Learning Outcomes

By the end of this section, you will be able to:

  • 1 List the key performance indicators (KPIs) for measuring the effectiveness of an advertising campaign.
  • 2 Describe how each KPI is measured.

Key Metrics in Measuring Success

The most well-planned advertising campaigns are only effective if they bring about some result. Marketers use performance metrics to determine the effectiveness of a campaign.

Key performance indicators (KPIs) are indicators that measure how an advertising campaign is achieving certain goals or objectives. There are several KPIs marketers choose to measure to determine the impact of an advertising campaign. These metrics help marketers make changes to campaigns in order to meet the goals and objectives set forth.

Brand Recognition

Brand recognition refers to the ability of a campaign audience to recognize and identify a specific brand. It measures the extent to which an audience can identify a brand with only a logo or photo. Depending on the advertising media used, marketers will choose the most appropriate metric to measure brand recognition. There are also numerous brand-tracking software programs that will gather this data for marketers.

Brand Awareness

While brand recognition and brand awareness sound very similar, there is a distinct difference. Brand awareness takes recognition a step further to determine if audiences can recall information about the brand. Awareness often seeks to determine the emotions and impressions that a campaign has raised with specific advertisements.

Impressions (Ad Views)

During an advertising campaign, marketers are also interested in quantifying how many times an advertisement appears in a chosen medium, known as impressions. To calculate impressions, you need to first determine the rating of the advertisement. The rating is simply a percentage of the target audience that is reached with an advertisement. This data is often gathered by outside firms, such as Nielsen, a long-time marketing research firm.

The following is the accepted impressions formula:

Impressions = Rating × Target Population × Number of Ads RunImpressions = Rating × Target Population × Number of Ads Run

Let’s assume that one of your television advertisements ran 2 times this week. Your target audience is 1 million people. You discover that your ad has a rating of 30 percent, or 0.30. Using the impressions formula

Impressions = 0.30 × 1,000,000 × 2 = 600,000 ImpressionsImpressions = 0.30 × 1,000,000 × 2 = 600,000 Impressions

Conversion Rate

A conversion rate refers to the percentage of an audience that has completed a desired action. The formula for conversion rate is

Conversion Rate=Number of Converts(Audience Size)× 100%Conversion Rate=Number of Converts(Audience Size)× 100%

For example, a web page advertisement may be attempting to get a viewer to click on the advertisement.

The conversion rate, then, would be the percentage of those viewers who clicked on the advertisement. Using our example of the web page advertisement, let’s assume that our audience size 500,000 and the number of converts (that is, the number of viewers who click the ad) is 100,000. Our conversion rate would be

Conversion Rate=100,000500,000 × 100% = 0.020, or 2.0%Conversion Rate=100,000500,000 × 100% = 0.020, or 2.0%

While industry averages can vary, generally a conversion rate somewhere between 2 percent and 5 percent for traditional marketing and above 10% for digital marketing is considered effective.11

Return on Ad Spend (ROAS)

Marketers are also often interested in calculating the return on advertising spending. Return on ad spend (ROAS) is a metric that measures the amount of revenue earned for every dollar spending on advertising. Unlike the other metrics discussed, ROAS utilizes the revenue from advertising. To calculate ROAS, you will simply divide the revenue for a given period by the advertising dollars in the period. The ROAS formula is

ROAS=RevenueAdvertising DollarsROAS=RevenueAdvertising Dollars

Let’s assume your company spent $1,000 on an online campaign in a given month. The revenue generated from this campaign was $5,000. Your ROAS for this campaign in this period would be $5, or a 5:1 ratio:

ROAS=$5,000$1,000 = $5ROAS=$5,000$1,000 = $5

In other words, for every $1 spent on advertisement, your company generated $5 in revenue.

Knowledge Check

It’s time to check your knowledge on the concepts presented in this section. Refer to the Answer Key at the end of the book for feedback.

1.
Ally is a new marketer trying to determine the return on ad spend that her first marketing campaign netted. She spent $500 on a Facebook advertisement, and the ad brought in $20 of revenue. Which of the following would be the return on ad spend (ROAS)?
  1. $25
  2. 5:1
  3. 10,000
  4. $2.50
2.
You show your friend the Adidas logo and ask them which brand it identifies. This is an example of ________.
  1. brand impression
  2. brand awareness
  3. brand recognition
  4. conversion rate
3.
Coco is trying to determine if the most recent ad she created and launched has been effective at increasing revenue. Which of the following metrics would you recommend Coco use?
  1. ROAS
  2. Impressions
  3. Brand awareness
  4. Brand recognition
4.
Indicators that measure the effectiveness of an advertising campaign are known as ________.
  1. KMAs
  2. Recalls
  3. ROIs
  4. KPIs
5.
Liam is interested in the ratings of a recent television advertisement. They are interested in calculating the impressions of this ad. Liam knows that the target population of this ad is 500,000, and the ad runs three times. Which information is Liam missing to calculate impressions?
  1. Converts
  2. Rating
  3. Conversion rate
  4. Number of weeks the ad ran

Marketing Dashboard

Measuring the Impact of Advertising

When marketing professionals purchase advertising, they are primarily interested in who will see it. Advertising is dependent on views, as it is not direct response like search or email marketing. Therefore, marketing professionals are looking for the biggest bang for their buck. This is where cost per thousand (CPM) comes in. The “M” in cost per thousand represents the Latin term mille. CPM is the cost to advertise to 1,000 people.

An advertisement’s cost per thousand depends on a variety of factors. One such factor is how targeted an ad is to a given audience. Targetability increases the cost per thousand. Another factor is whether the media is digital or traditional. Traditional media (television, radio, print, and outdoor) have a higher CPM than digital advertising. Niche media may have higher CPM than mass media.

There are some legitimate criticisms of CPM. First, an ad view does not indicate an intent to purchase. It simply means that a prospective customer saw the ad. We have no way of knowing whether the ad was persuasive or changed behavior. CPM does not allow us to track behavior. Next, ad views may be duplicative or not properly targeted, potentially wasting the impression. For example, if you see an ad for the same running shoe three times and you’re not a runner, the brand wasted three impressions on you because you have no intent to purchase. Finally, ads may not run or load as intended, wasting advertising dollars on a failed impression.

CPM=Campaign Cost(Impressions)× 1,000CPM=Campaign Cost(Impressions)× 1,000

Let’s revisit our ice cream shop from Integrated Marketing Communications. We decided to run an advertising campaign in the local newspaper. We paid $1,000 for 2,000 impressions. What is our CPM?

Last period, we acquired 15 customers from our advertising campaign with an average customer lifetime value of $50. Did our advertising campaign have a profitable result in the last period?

Let’s say we decide to reallocate our $1,000 advertising spend on a more targeted campaign. Do you expect that our CPM will increase or decrease?

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